Each year, as a new year begins, we encourage you to review your estate plan and your estate plan documents (Will, Power of Attorney, Health Care Directive/Proxy, Trusts) to ensure that they reflect changes to the tax law and/or changes to your family or financial situation since your documents were executed. This year, as 2018 begins, recent significant changes to the estate and gift tax laws make that review imperative.
With the enactment of The 2017 Tax Cuts and Jobs Act only a few weeks ago, the federal estate and gift tax exemption that was scheduled to increase to $5,600,000 has doubled (to approximately $11,200,000) and portability remains in place. This means that a married couple (who have not previously used any of their unified credit) can now have combined assets of approximately $22,400,000 without incurring federal estate tax.
For individuals domiciled in New Jersey, the estate tax exemption has been eliminated as of January 1, 2018 (although with Governor-Elect Phil Murphy soon to take office, this could soon change). The New York estate tax exemption is currently $5,250,000 and is scheduled to equal the federal exemption on April 1, 2019.
On account of these changes, individuals may wish to revise an existing Will, particularly if it contains a “credit shelter” provision based on a formula calling for funding up to the amount of the available exemption, even if only the state exemption. Such a Will may now cause an individual’s entire estate to be left in trust instead of having a significant portion passing outright to the surviving spouse. Furthermore, older individuals in various stages of relocating to Florida may now wish to reconsider whether a change in domicile is advisable.
Periodic review of an estate plan and related documents is always a good idea. This year, on account of dramatic tax law changes, a review of your estate plan is especially important.